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Carrier closing to cost Indiana economy $108M a year

June 20, 2016

Carrier Corp.’s decision to shutter its manufacturing operation on Indianapolis’ west side will cause a domino effect that will wipe out more than 2,700 jobs across Indiana and cost the state's economy more than $100 million a year, experts say.

Carrier plans to eliminate 1,400 low- to midgrade manufacturing jobs during the next three years and move its production facility to Mexico. That move will ripple through Indiana and forever change Indianapolis' west side.

“The closing of the plant will have a much wider impact than just the immediate area of the city,” said Jerry Conover, director of the Indiana Business Research Center at Indiana University’s Kelley School of Business.

The elimination of Carrier’s 1,400 jobs will cause an additional 1,358 jobs to be lost across the state, Conover said, citing economic predictions made by the center. That is further compounded by the fact that Huntington-based United Technologies Electronic Controls is eliminating 700 Hoosier jobs by 2018 and moving its operation to Mexico.

Carrier Corp. and UTEC are divisions of Hartford, Conn.-based United Technologies Corp.

The decision to cut 2,100 manufacturing jobs across the state was financial, according to a statement from Carrier, which will begin eliminating its Indianapolis workforce in 2017 and continue the layoffs through 2019.

Carrier’s workers are classified in a two-tier wage system.

A quarter of the workers make about $14 an hour, or $30,000 a year. The rest, however, make about $26 an hour, or about $55,000, but earn well above $70,000 a year with overtime, said Chuck Jones, president of United Steelworkers Local 1999, which represents the Carrier workers who will lose their jobs.

The Mexican workers replacing Carrier employees will earn a base wage of $3 an hour, which is $23 less than some of the top-paid employees in Indianapolis.

The elimination of Carrier’s production employees will cut $67 million a year from income statewide, Conover said. When jobs that will be lost from suppliers and other businesses dependent on Carrier are counted, that figure almost doubles to $108 million a year.

The likelihood that Carrier’s workers will find similar high-paying jobs in Indianapolis is unlikely, experts said.

“People are very uncertain, not knowing what the future is going to bring,” Jones said. “It’s scary when you don’t know what you’re going to do after a certain period of time. It’s not just one person affected; there are a lot of instances of several family members losing jobs.

“You’re taking away multiple incomes, and there’s no doubt people are scared.”

Carrier and the United Steelworkers have not reached an agreement on severance packages for employees. Until then, Carrier’s employees will be in limbo. If they leave before a bargain is struck, they won’t be able to receive severance pay, educational benefits or assistance from local, state and federal sources.

“If people leave now, they’re walking away from all of that,” Jones said. “If they don’t stay until their time is up, they’re not going to get any of the severance or the training that’s provided.”

Jones said the union is sending representatives to meet with members of Congress to discuss the layoffs and convey the severity of the situation. He said he’s hopeful the pressure will help the workers land a decent severance package, which will be fleshed out in mid-July.

“Whatever you get is not going to be enough, but we are optimistic we can go in and bargain a good severance package,” Jones said. “Companies are obligated to meet with us, but they are not obliged to give us anything.”

Carrier has said it will make some separation benefits — including one that pays for college tuition, books and fees — available to displaced workers.

Carrier, which has been in Indianapolis since the 1950s, spurred economic growth in the city, especially in the area near the plant. Indianapolis will feel a shock when Carrier is gone, but it won’t be as bad as life would be in a one-factory town, said David Audretsch, distinguished professor and Ameritech chair of economic development in the School of Public and Environmental Affairs at Indiana University.

“This is a pretty prominent employer, especially for these kinds of workers in the community,” Audretsch said. “Just as Bruce Springsteen once said in a song, these jobs are going and they aren’t coming back.”

Audretsch warned that Carrier’s closing will be a detriment to businesses and neighborhoods near the plant.

“Given this scenario, my guess would be that this could easily trigger a downward spiral,” he said. “There’s likely to be foreclosures and people who can’t keep up with their house payments.”

According to census data, of the people who live within a half-mile radius of the Carrier plant, 62.8 percent are manufacturing workers and 66.7 percent earn about $40,000 or more a year.

“For the people who are laid off and people who are dependents, it’s going to be pretty devastating,” Audretsch said.

David Moore, who cuts hair at Hot Stylz, a barber shop across the street from the Carrier plant, said the plant closure will have a dramatic effect on business.

“It’s going to slow a lot of traffic down,” he said. “We still have other companies around here, but Carrier is a big part of it.”

Moore also said that when the Carrier jobs are gone, he’s worried the crime rate will escalate in the area because there’s no way all those people will find work.

“A lot of guys are worried about the crime rate going up,” he said. “When people don’t have jobs — a lot of people moved over here for this job and have been there 20-plus years, or they’re just starting out and had a good opportunity — the shops nearby are open and everybody in here gets cash money, and that’s a risk.”